If you style yourself a contrarian – and most people do – you have to at least start looking at European stocks. The falling Euro is taken here as an excuse to sell US stocks and obviously it doesn’t say good things about Europe that the currency is falling, but these things have a way of correcting themselves. A lower Euro over a reasonable period of time should prove at least somewhat beneficial to companies and countries that export a lot.

May 27 (Bloomberg) — “The crisis is over.”

So says Emeric Challier, a money manager at Avenir Finance Investment Managers in Paris.

Rather than being alarmed by the plunging euro — down 4.1 percent against the dollar in the week before the European Union’s nearly trillion-dollar bailout for debt-saddled members and 3.1 percent the week after — he cites the economic boost a weaker currency provides.

“The advantage of the euro drop is it will continue to support the recovery,” says Challier, who is betting that Spanish, Portuguese and Italian government bonds will rise. German exports and Spanish and Greek vacations become cheaper for Americans and Asians, Bloomberg Markets magazine reports in its July issue. The benefit is especially significant if the euro is depressed a year or more, he says.

As he points out, it takes time to have an effect but I see no reason to expect the Euro to rally anytime soon. In addition, the cuts in government spending which gives politicians such nightmares, is actually good for the long term health of an economy. Less going to government spending means more staying in the more efficient private sector:

The fiscal discipline that comes as a condition of the rescue package will also benefit European economies after the initial pain of government spending cuts and tax increases, says Christoph Kind, head of asset allocation at Frankfurt Trust, which manages about $17 billion.

There are some precedents. South Korea and Indonesia flourished after the Asian currency crisis of the late 1990s ushered in budgetary restraints and financial reforms, Kind says.

“Hopefully history repeats itself, and these austerity packages lead to substantial improvement here,” he says.

So what do we look for? Here are a couple of screens I ran as a starting point (emphasize starting point; these are not recommendations and you need to do your own research)

Price/sales ratio < 1.5 and a dividend yield > 4%

• ALU – Alcatel Lucent
• AXA – AXA Insurance
• BBVA – Banco Bilbao Vizcaya
• STD – Banco Santander
• BP – British Petroleum
• BT – BT Group
• DT – Deutsche Telekom
• EON – E.on
• FTE – France
• ING – ING Group
• NOK – Nokia
• REP – Repsol
• RBS – Royal Bank of Scotland
• RDSA – Royal Dutch Shell
• TI – Telecom Italia

Market Cap > $4 billion, Price/Book < 1.5, LT Debt to Equity < 50%

• MT – Arcelor Mittal
• ESV – Ensco
• PHG – Phillips Electronics
• SNY – Sanofi – Aventis
• STM – ST Microelectronics
• VOD – Vodaphone

Net Profit Margin > 15%, ROE > 15%, Price/Cash Flow < 10

• AZN – Astrazeneca
• BCS – Barclay’s
• GSK – Glaxo Smithkline
• NVS – Novartis

Full Disclosure: Alhambra or its clients own: BCS, NVS, BP and STD